A recent report by Paul Myners for the UK Treasury has
provided a wealth of information on the structure and operation of the
pension fund industry in the UK. The report points to serious deficiencies
in the governance of pension funds. These concerns are of considerable
significance in their own right. But a fundamental focus of the Review is on
their impact on the provision of private equity in the UK. This paper
summarizes evidence from the Review and evaluates its proposed remedies. It
concludes that to the extent that there is a private equity failure in the
UK, it has less to do with the governance of institutions than with
diversity and innovation in institutional design. The paper argues that
financial regulation bears critically on the extent of institutional
innovation and that US regulation has allowed its financial sector to
respond more readily to the needs of high technology sectors than the UK's.